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BH Properties Buys Three Hotel Leases in Manhattan for $338.2M

A view of the Manhattan skyline from the Element, one of the three hotel leases BH Properties purchased. Photo courtesy of the Element.

A view of the Manhattan skyline from the Element, one of the three hotel leases BH Properties purchased. Photo courtesy of the Element.

NEW YORK — BH Properties has purchased a portfolio of three New York City hotel leases for $338.2 million. Lexington Realty Trust sold the leased fee positions, which give the owner rights to the rent revenue without actually owning the property, similar to a ground lease.

The acquisition is BH Properties’ first transaction in Manhattan and the largest transaction in the firm’s history. The deal was structured as a reverse 1031 exchange.

BH Properties restructured its balance sheet to acquire the assets. The firm plans to divest up to 25 properties throughout the country in the next six months.

Acquiring the leased fee positions in New York provided the firm with an opportunity to dispose of some properties that are either outside its target market or are no longer a focus for its investment strategy, according to Steve Gozini, the firm’s president.

Ascott Residence Trust owns the Element, a 411-room hotel on 311 W. 39th St., and the 369-room Sheraton Tribeca at 370 Canal St. Magna Hospitality owns the 399-room Doubletree Hotel at 8 Stone St. Magna also manages all three assets.

The three hotels were built in 2010, opened in 2011 and stabilized in 2012. Magna was the original developer of the three hotels and Lexington Realty Trust in 2013 was the original ground lessor. Around the same time, Magna sold the Element and Sheraton Tribeca to Ascott Residence Trust as part of its recapitalization of the project.

Eastdil Secured executed the transaction.

— Nellie Day

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